95-1006

Income Tax

Signed 10/11/95

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

XXXXX, )

Petitioner, : ORDER

v. : Appeal No. 95-1006

COLLECTION DIVISION OF THE : Account No. XXXXX

UTAH STATE TAX COMMISSION, :

Respondent. : Tax Type: Income Tax

_____________________________________

STATEMENT OF CASE

This matter came before the Utah State Tax Commission for an Initial Hearing pursuant to the provisions of Utah Code Ann. §59-1-502.5, on XXXXX. Jane Phan, Administrative Law Judge, heard the matter for and on behalf of the Commission. Present and representing Petitioner was XXXXX. Present and representing Respondent was XXXXX.

Penalties in the amount of $$$$$ and interest of approximately $$$$$ were assessed against Petitioner relating to income tax for the XXXXX tax year. Petitioner had request a waiver of the penalties and interest from the Collection Division Waiver Unit which was denied. The underlying tax owed for the year in question was $$$$$.

Petitioner stated that the penalties and interest should be waived based on unattainable records. He explained that his income was derived from several corporations and these corporations' books could not be finalized for the XXXXX tax year because of ongoing litigation. Petitioner's income could not be determined for the XXXXX tax year until the litigation was resolved. The litigation was finally resolved by a settlement agreement dated XXXXX and this allowed the corporations to prepare corporate financial statements and tax returns. When his accountants had the necessary information Petitioner filed his return in XXXXX.

Respondent's representative stated Petitioner had both filed his return late and paid his taxes late. She stated that the original XXXXX return had been filed by Petitioner in XXXXX but no payment had been made. Respondent explained that in order to obtain a filing extension a prepayment was required. Petitioner said that his accountants had filed the return at that time knowing it would need to be amended according to the outcome of the litigation and that they did file the amended return in XXXXX. He stated that he did not know why payment had not been made at the time the original return was filed and did not understand the prepayment requirement.

Respondent's representative stated that, although Petitioner's amended return for XXXXX was filed in either XXXXX, the payment was not made until XXXXX. Petitioner explained that because he was retired at that time he did not have the money to pay the tax until XXXXX. Respondent explained that originally an extension penalty had been assessed against Petitioner because he had not made a prepayment. The extension penalty was later reduced to the lesser, 10% late filing penalty. A 10% late payment penalty had also been assessed. Respondent did not think the circumstances described by Petitioner rose to the level of sufficient reasonable cause for waiver of the penalties. Respondent explained that interest is generally waived only in the event that an error by the Tax Commission contributed to the late payment or filing.

APPLICABLE LAW

The Tax Commission is granted the authority to waive, reduce, or compromise penalties and interest upon a showing of reasonable cause. (Utah Code Ann. §59-1-401(10).)

DECISION AND ORDER

Petitioner had not paid his XXXXX income tax liability until XXXXX. Recognizing that there may be circumstances where the taxpayer does not have sufficient information to file a return timely, an extension for filing is allowed until the following October if the taxpayer makes a prepayment of 90% of that years income tax liability or 100% of the prior years income tax liability. Petitioner made no prepayment. Further, Petitioner made no payment with the original return which was filed by his accountants in XXXXX.

Based upon the information presented at the hearing, and the records of the Tax Commission, the Commission finds sufficient cause has not been shown to waive the penalties of $$$$$ and interest of approximately $$$$$ assessed relating to Petitioner's income tax for the XXXXX tax year.

This decision does not limit a party's right to a Formal Hearing. However, this Decision and Order will become the Final Decision and Order of the Commission unless any party to this case files a written request within thirty (30) days of the date of this decision to proceed to a Formal Hearing. Such a request shall be mailed to the address listed below and must include the Petitioner's name, address, and appeal number:

Utah State Tax Commission

Appeals Division

210 North 1950 West

Salt Lake City, Utah 84134

Failure to request a Formal Hearing will preclude any further administrative action or appeal rights in this matter.

DATED this 11 day of October, 1995.

BY ORDER OF THE UTAH STATE TAX COMMISSION.

W. Val Oveson Roger O. Tew

Chairman Commissioner

Joe B. Pacheco Alice Shearer

Commissioner Commissioner